PARTNERSHIP Flashcards
What is the creation of a general partnership?
Occurs when 2 or more persons, as co-owners, carry on a business for profit
No written agreement or formalities are required.
What is presumed if there is an agreement to share profits equally?
A partnership
Absent to the contrary, each partner has an equal vote; profits and losses are shared equally.
What is required for the formation of a limited partnership (LP)?
At least one general partner and filing a certificate of limited partnership with the Secretary of State
The certificate must include specific information such as the name and address of the partnership.
What must be included in the certificate of limited partnership?
- Name of limited partnership
- Address of partnership principal office
- Name of partnership’s registered agent
- Name and address of each general partner
- Whether the partnership is a limited liability limited partnership
Must be signed by all general partners.
What happens if the certificate of limited partnership fails to meet requirements?
A general partnership is created.
What is a limited liability partnership (LLP)?
A partnership in which all partners have limited personal liability
An LLP can be formed upon approval and filing a statement of qualification.
What is required to become an LLP?
- Approval by the same vote necessary to amend the partnership’s agreement
- Filing a statement of qualification with the Secretary of State
The statement includes the name and address of the partnership and election to become an LLP.
What factors do courts consider to determine if a business operates as a partnership?
- Operates under the same name
- Separate files in different rooms
- Same office staff
- Contributed money to another entity
- Intends to share profits
- Pays rent for a separate office
What authority do partners have to bind the partnership?
Each partner is an agent of the partnership and generally has authority to bind it for business purposes.
What type of authority does a partner have for acts within the ordinary course of business?
Express actual authority
Acts need only be approved by the majority partners.
What must occur for acts not within the ordinary course of business?
Must be approved unanimously.
What is implied authority in the context of partnerships?
A partner has implied authority to take actions reasonably necessary to achieve the partner’s authorized duties.
What is apparent authority?
A partner has apparent authority to bind the partnership for all acts apparently conducted within the ordinary course of the partnership business.
What are the conditions under which a partner’s act will not bind the partnership?
- Partner lacked authority
- 3rd party knew or had notice of lack of authority
What is the personal liability of general partners?
General partners are personally liable for all obligations of the partnership unless agreed otherwise.
What does jointly and severally liable mean for general partners?
Claimant can collect the full amount of debt from any one of the partners.
Are incoming partners personally liable for obligations incurred prior to their admission?
No, unless they have notice of the claim.
What is the liability of outgoing partners?
Remain liable for debts of the partnership while they were still partners unless there has been a novation, release, or payment.
Under what circumstances can a judgment creditor levy execution against a partner’s personal assets for a partnership debt?
Only if the judgment has been rendered against the partners or the partnership’s assets have been exhausted or are insufficient.
What is the obligation incurred by a limited liability partnership (LLP)?
Solely the obligation of the LLP, with exceptions for partner misconduct.
What rights does a partner have regarding the transfer of ownership interest in a partnership?
A partner can only transfer their interest in the share of profits and losses and their right to receive distributions.
What must happen for a transferee of a partnership interest to become a partner?
All partners must consent.
What fiduciary duties do partners owe to the partnership and each other?
- Duty of care
- Duty of loyalty
What constitutes a breach of the duty of care?
Engaging in gross negligence, reckless conduct, intentional misconduct, or knowingly violating the law.
